Helping young families meet their housing needs – by renting or buying – is a major policy issue for any government. A few weeks ago we discussed a new instrument intended to support renters, called the Social Rental Agency[1]. This article is the first in a new series that will look at recent and planned measures and programs designed to help young households buy a flat or house. The issue is all the more topical given the government’s pledge to offer a 2% fixed-rate mortgage for first-time home buyers from mid-2023.
I. Existing legal framework
As of the time of writing (24 February 2023), the key existing piece of legislation is the Guaranteed Home Loan Act of 1 October 2021[2] (henceforth Housing Act 2021). All the subsequent government measures and programs are based on it. Housing Act 2021 introduces the institution of guaranteed home loan (a home loan guaranteed by the government); establishes a Government Housing Fund (RFM) within Bank Gospodarstwa Krajowego (BGK), the state development bank, for such loans; and lays down a model agreement between BGK and commercial banks regarding the granting of guaranteed home loans to households.
In a guaranteed home loan, BGK guarantees to cover the downpayment for the borrower, up to a maximum of PLN 100,000 (€21,200). This means young households can buy a home with no savings[3]. Housing Act 2021 sets terms and conditions for the granting and repayment of such loans, including so-called Family Repayment, in which BGK provides PLN 20,000 (€4,230) towards loan repayment if the borrower household expands with a second child during the repayment period, and PLN 60,000 (€12,700) in the event of a third or subsequent (fourth, fifth) child[4]. An eligible household is entitled to one guaranteed home loan.
Thus, it works as follows: BGK enters into an agreement with a commercial bank, authorizing it to extend guaranteed home loans to households; the commercial bank grants such loans to eligible households, with BGK guaranteeing the downpayment; the households use the borrowed money to cover part or all of the costs of buying or building a home.
Importantly, until the BGK guarantee expires, no business activity is allowed to be conducted in the property purchased or built using the loan.
In 2022 the ruling coalition took another legislative step to help young families satisfy their housing needs: the Act of 4 November 2022 on housing co-ops and on rules concerning the disposal of properties from a commune’s real estate stock[5] (henceforth Housing Act 2022) will come into effect on 1 March 2023.
Housing Act 2022 slightly modifies the guaranteed home loan, in that it changes the cap on BGK guarantees from “up to a maximum of PLN 100,000 (€21,200)” to “up to a maximum of PLN 200,000 (€42,400) and not more than 20% of the loan amount”. It also renames the guaranteed home loan into the family home loan. Its key features, however, are a new institution called the housing co-op, and new rules concerning the disposal of properties from a commune’s real estate stock to support housing projects. We will discuss these issues in a subsequent article of our series.
II. Eligible properties under Housing Act 2021 and Housing Act 2022
The provisions of Housing Act 2021 and Housing Act 2022 cover new-build and resale flats and houses built by developers, not-for-profit housing associations (TBS, SIM), or housing cooperatives.
The guaranteed home loan / family home loan can be used to 1) build a single-family house, 2) purchase a flat or single-family house, 3) purchase a land plot with the aim of building a single-family house on it, provided that such construction is permitted by the local spatial development plan, or by a decision on land development and management conditions; 4) purchase a cooperative member’s right to a flat or single-family house (i.e., tenancy, tenant-ownership, or an expectative of ownership[6]).
III. „2% fixed-rate mortgage from the government”
”2% fixed-rate mortgage from the government” is the popular name of another program that the government began to talk about in late 2022 and which it wants to introduce this year. On 31 January a draft legislative proposal was unveiled, titled the Act on state support for home savings (henceforth Draft Housing Act 2023)[7]. It is currently at the interdepartmental consultation stage and is planned to come into effect at the beginning of the second half of 2023.
The explanatory memorandum to Draft Housing Act 2023 states that its purpose is “to support households in saving regularly for their first home (flat or house) that will satisfy their housing needs,” and “to strengthen the capacity to obtain and repay a home loan for households seeking to build or buy their first home (flat or house) in order to satisfy their housing needs, at this time of heightened macroeconomic volatility and high interest rates”. The memorandum adds that the current offer of fixed-rate mortgage loans from commercial banks is insufficient, especially when it comes to loans longer than five years.
The difference between Housing Acts 2021 and 2022 on the one hand, and Draft Housing Act 2023 on the other, is that whereas the former focus on tackling the issue of downpayment as a major barrier to mortgage access, Draft Housing Act 2023 concentrates on helping young families accumulate financial resources to buy or build their first home, and on guaranteeing safe repayment terms for their home loans. It seeks to achieve these objectives through three measures, Home Account, Home Deposit, and Safe Mortgage 2%.
We will discuss Home Account, Home Deposit, and Safe Mortgage 2% in detail in the next article in our series. We will also look at the housing co-op, one of the new instruments introduced by Housing Act 2021.
By Jan Akimenkow, trainee attorney-at-law
Originally published in PMR Construction Insight: Poland, No. 3 (264), March 2023
[1] The article can be found in the December issue of PMR Construction Insight: Poland (12/2022)
[2] Journal of Laws 2022 item 2008. The law came fully into force on 26 May 2022.
[3] BGK charges a commission equal to 1% of the loan amount.
[4] By way of illustration: Case 1: a family with one child obtains a guaranteed home loan, then a second child is born – the family gets PLN 20,000 (€4,230) towards repayment from BGK; Case 2: the family from Case 1 expands with another, third child – the family gets PLN 60,000 (€12,700) towards repayment from BGK; Case 3: a family with two children obtains a guaranteed home loan, then a third child is born – the family gets PLN 60,000 (€12,700) towards repayment from BGK; Case 4: A family with three children obtains a guaranteed home loan, then a fourth child is born – the family gets PLN 60,000 (€12,700) towards repayment from BGK.
[5] Journal of Laws 2023 item 28.
[6] In an expectative of ownership, the cooperative and the buyer enter into an agreement for the construction of a flat or house. This agreement, which must be in writing to be valid, should commit both parties to enter into an agreement establishing a separate title to premises once the flat or house is built.
[7] The ministry putting forward the proposal is the Ministry of Technology and Development. The text of the draft bill and other related documents are available on the Government Legislation Centre (RCL)’s website under the identification number UD479.